The IEA’s video clip ‘Has ‘real socialism’ ever been tried?’, released three months ago, seems to have struck a chord. So far, it has been watched 37,900 times on Facebook, plus 5,300 times on YouTube, and who knows how many times on Twitter and on our own website.

Had this video been released a couple of years earlier, this would not have happened. People would have said: “Why are you guys talking about socialism? Socialism is finished. It ended with the fall of the Berlin Wall. Only a few fringe groups of die-hard Trotskyites still advocate it. Everyone else is just talking about improving capitalism.”

This is clearly not true anymore (if it ever was). Socialism has made full-blown comeback. It is once again mainstream – even trendy – to be a socialist.

Or is it? One of the most common criticisms we have received since the publication of the video concerned the definition of socialism. Sure, the dictionary definition is straightforward enough. According to Merriam-Webster, socialism is “any of various economic and political theories advocating collective or governmental ownership and administration of the means of production and distribution of goods”. But is that really what people mean when they describe themselves as ’socialists’ or express approval of it?

At least in the English-speaking world, the term is also sometimes used in reference to countries with strong social democratic traditions, such as the Nordic countries. So is the apparent popularity of socialism really just a semantic confusion? Are self-described socialists really just Nordic-style social democrats, who happen to have a penchant for socialist rhetoric? If so, are we missing the point by talking about places like Venezuela, when British socialists really just want Britain to be a bit more like Sweden or Denmark?

The answer is no. This is not about semantics or political labels. It is about policy content. It is not that self-described socialists are not ‘really’ socialists. Rather, self-described admirers of the Nordic model are not really admirers of the Nordic model.

“Despite massive differences between the countries, some […] argue that a leftwards shift [in the UK] would result in political and economic collapse similar to […] Venezuela. In reality, the Nordic states are a much better point of comparison. More mixed economies and comprehensive welfare states lead them to outperform the UK”.

The Nordic economies, then, are seen as somewhere between the ‘neoliberal’ economy of the UK, and the socialist economy of Venezuela. This is not true. The Nordic economies are not ‘more mixed economies’. The difference between them and Venezuela is not a difference in degree. It is a qualitative difference: the difference between a large state and an interventionist state.

Imagine two hypothetical societies: Nordland and Bolivaria. In Bolivaria, taxes are fairly low. But the state is involved in economic life at every step of the way. It owns and runs a large number of companies, it sets most prices and wages, it directs investment flows, it directs trade flows, it allocates goods and services, and so on. It is not a pure socialist economy, but the state occupies most of the economy’s commanding heights.

Meanwhile in Nordland, the state generally stays out of economic activity. Companies are privately owned, prices and wages are set by the market, and the market also directs investment flows and trade flows, as well as allocating goods and services. The government of Nordland leaves the market alone to create wealth. But once the market has done that, the government takes a very large chunk of that wealth, and redistributes it. Nordland is a high-tax economy with high levels of public spending.

Which of these two economies is closer to a free market? It depends on the details, but unless the tax burden in Nordland is so onerous that it crushes market activity, I would say that Nordland is definitely freer. I would not move to either of these countries, but if I had to pick one, I would move to Nordland (and then set up an organisation campaigning for lower taxes there).

These are obviously stylised examples. Denmark and Sweden are not like Nordland, and Venezuela is not like Bolivaria. But these examples are clarifying. The reality is more complicated and messier, but not a million miles from the above.

The Nordic countries score very highly on indices like the Economic Freedom Index or the Ease of Doing Business Index – except in those subcategories that are specifically related to the tax burden (Fraser Institute 2016; World Bank 2017). On the latter index, Denmark and Norway rank higher than the UK and the US, with Sweden just one place behind. On the former index, the UK and the US rank above the Nordic countries, but the difference is solely due to the latter’s low score in the ‘Size of Government’ subcategory. If we exclude that subcategory, Denmark, Finland and Sweden rank above the UK and the US, with Norway ranking in between them.

Relative to most other developed economies, the Nordic economies are relatively liberal, except for their high taxes. Even in the provision of public services, they often rely on market-like mechanisms, whilst also allowing private sector participation. Local authorities are, to a large extent, responsible for their own spending, which they must fund through locally raised taxes.

Most of the socialist policies which currently enjoy huge popularity in Britain – nationalisations, wage and price controls, an activist industrial policy, a rejection of market mechanisms and private sector involvement in the provision of public services etc – do not have much of a counterpart in the Nordic countries. At the same time, UK policies or policy proposals which do have a close Nordic equivalent are controversial in Britain, and fiercely opposed by socialists.

For example, the UK’s free schools were explicitly modelled on the Swedish friskolor, and can be thought of as a watered-down version of them. The creation of a quasi-market within the NHS, with greater levels of patient choice and provider autonomy, has also been, if not directly inspired by, then at least mirrored by a similar agenda in Sweden. The socialist left in the UK has opposed those changes right from the start, and continues to advocate their reversal.

Sure: In practice, most people who advocate an interventionist state also advocate a large state, and most people who advocate a laissez-faire economy also advocate a small state. But the large state/little intervention combination is not exactly unheard of in the UK. This was more or less what New Labour’s ‘Third Way’ was about. It is the Blairites – not the socialists – who can be reasonably described as Nordic-style social democrats. ‘Blairite’, of course, has long become a term of abuse on the socialist left.

So no, socialists in Britain are not Nordic-style social democrats. They may mention Sweden or Denmark, sure, but what else should they do? All countries which have ever implemented the policies that British socialist want to implement have ended up as economic basket cases. They cannot point to a successful example, because there is none, and there never has been one. So they point to a set of countries which are successful for a completely different reason, and pretend that these countries are a showcase of the pet policies of the British left. Which they aren’t.

Rhetorical references to ‘the Nordic model’ count for little if it is coupled with a rejection of all the policies that make the Nordic model work. I don’t want to put too much stock in political labels. But if people call themselves socialists, advocate socialist policies, and rail against non-socialist policies – they probably are socialists.

Dr Kristian Niemietz joined the IEA in 2008 as Poverty Research Fellow, becoming its Senior Research Fellow in 2013 and Head of Health and Welfare in 2015. Kristian is also a Fellow of the Age Endeavour Fellowship.
He studied Economics at the Humboldt Universität zu Berlin and the Universidad de Salamanca, graduating in 2007 as Diplom-Volkswirt (≈MSc in Economics). During his studies, he interned at the Central Bank of Bolivia (2004), the National Statistics Office of Paraguay (2005), and at the IEA (2006). In 2013, he completed a PhD in Political Economy at King’s College London. Kristian previously worked as a Research Fellow at the Berlin-based Institute for Free Enterprise (IUF), and at King's College London, where he taught Economics throughout his postgraduate studies. He is a regular contributor to various journals in the UK, Germany and Switzerland.

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